And hit OK. A file window should pop up containing one file that starts with iPhone. Check whether it ends with ".ipsw" - if it doesn't, you'll have to turn on file extension display by going to the Tools menu -> Folder Options -> View tab -> Uncheck "Hide extensions for known file types". Right-click the iPhone update file and choose "Rename". Give it the name "iPhone.zip" and press Enter, and confirm that you want to change the extension.

Now double-click the file to open its contents. Extract them all to your modding folder overwriting the existing files.